Credit Report: Top Derogatory Credit Items

Derogatory credit items will hurt your credit scores and can cause a credit, loan, or mortgage denial.  Creditors will pull your credit report and will not just look at your credit scores but will also look at your overall credit report and credit history and especially derogatory credit items.  There are derogatory credit items that will really be scrutinzed and will always be a red flag.  We will discuss the top derogatory credit items that will impact your credit scores and will advice you on how to negate these top derogatory credit items so your credit report will not look so bad in the eyes of the creditor.

Late Payments: Non-Payments Lead To Charge Offs

When you are late on your monthly credit payments, the creditor will start sending you reminder notices month after month.  After several months of trying to collect on your debt, the creditor might deem your debt as a noncollectible debt and most likely will write it off from their books and classify it as a charge off and the charge off will be reported on your credit report as a charge off.  Charge offs accounts can be buried on the books of creditors or the creditor might sell the bad debt to a credit collection agency for pennies on the dollar.  In most cases, the same debt that has been charged off is re-reported on your credit report by the collection agency so basically, you now have two negative creditors reporting on your credit report for the same debt.  Your credit scores will definitely drop due to the negative fresh credit reporting.  Your charge off account may be updated to a collection status or the charge off may just remain as a charge off account and the new collection agency might report a new collection status on your credit report.  Charge offs and collection accounts will remain for a period of 7 years on your credit report from the date of last activity.

Public Records: Bankruptcy, Foreclosure, Tax Liens, Judgments

Public records such as bankruptcy, foreclosure, judgments, and tax liens are serious derogatory credit items that will be reported on your credit report and derogatory credit items that will plummet your credit scores.  If you file bankruptcy, most of your credit liabilities are discharged but every single credit account will be reported as being discharged in your bankruptcy petition.  If you have dozens of derogatory credit items as part of your bankruptcy, each of those derogatory credit items will be reported on your credit report with zero balances since it has been included in your bankruptcy.  A bankruptcy is reported on your credit report for a period of 10 years for a Chapter 7 and 7 years for a Chapter 13.  Most folks who file bankruptcy get their credit re-established in a matter of a year and can have credit scores over 700 plus.  A bankruptcy can drop your credit scores by more than 150 points.

Foreclosure On Credit Report

If you default on your mortgage, your mortgage lender forecloses on your home and the foreclosure is recorded on your credit report.  A foreclosure will drop your credit score by more than 100 points.  A foreclosure, deed in lieu of foreclosure, short sale will remain on your credit report for a period of 7 years.  However, you  can re-establish your credit right after your foreclosure and recoup the credit drop in a matter of several months by re-establishing your credit.

Tax Liens On Credit Report

Tax liens are derogatory credit items that will drop your credit scores and can be on your credit report for a period of 15 years.  Tax liens are not dischargeable in a bankruptcy and you will be liable to pay any tax liens.  Paid tax liens remain on your credit report for a period of 10 years.

Judgment On Credit Report

Judgments are one of the worst derogatory credit items that you can have on your credit report.  An unpaid collection account can turn into a judgment if the creditor pursues legal proceedings.  A judgment is normally effective for a period of 10 years and a judgment creditor can renew a judgment for an additional 10 years for a total of 20 plus years.  A judgment creditor can pursue enforcement of a judgment by garnishing your wages, freezing your bank accounts, and placing liens on your property and assets.  A judgment debtor can have to have their judgment vacated, pay the judgment, negotiate on the judgment, make payment arrangements, or file bankruptcy to get rid of the judgment.  Judgments are like cancer where a judgment creditor can leave you alone for many years and once they get a wind that you are making money or have assets, they can come after you aggressively.  A judgment will remain on your credit report for a period of 7 years from the date the judgment was entered.  However, even if the judgment falls off your credit report after 7 years, the judgment may still be in force for a period of 10 or more years depending on the statute of limitations on your state.

Gustan Cho

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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